Boston Fed president: Clear, concise, confident and incomplete

The speech in Minneapolis Wednesday by Eric Rosengren, president of the Federal Reserve Bank of Boston, had the reassuring tone of every Fed officer’s talk I have ever heard.

Rosengren, at the Economic Club of Minnesota, walked a ballroom full of people through to a short history of the Fed’s large scale asset purchase program, with purchases of mortgage-backed and other securities still chunking away at a rate of $85 billion per month.

The unemployment rate has fallen, to 7.5 percent, while the rate of inflation has declined as well. So, Rosengren said, the monetary policy appears to be working. With no serious unintended consequences and a long way to go to generate full employment, perhaps there is a ways to go on the program as well.

Rosengren and other fed officials speak to the public to provide a little transparency to monetary policy making and also, it seems, to provide reassurance that smart people are in charge and they know what is happening.

He sounded professorial as he walked back and forth in front of the room between two large screens that showed his ten slides of charts and other data. He was clear, concise, and stayed away from jargon. He was also optimistic, about the impact of Fed monetary policy and the prospect for faster economic growth.

What’s missing is the context, although Rosengren hinted at it when he showed how the Fed’s balance sheet has ballooned since 2007. It’s coming up on five years since the worst of the liquidity crisis and the Fed is still acting in extraordinary ways.

What would have been good to hear from Rosengren is why the economy, with the federal government deficit spending and with the Fed buying $85 billion of securities per month, isn’t simply booming. And at that level of monetary accommodation, please explain how inflation could still be running well below 2 percent.